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Monday, 1 September 2014
Page: 9339


Mr BRUCE SCOTT (MaranoaDeputy Speaker) (19:22): I rise tonight to speak about an issue which, in my view and that of many others, threatens to suffocate the resilience of our food and fibre producers in this country. This section of the agricultural sector is very much in Northern Australia and is part of my electorate. It is an issue that concerns their future in seeing themselves through this extreme drought while dealing with the implications of the ban on the live cattle, which was imposed by the previous government, and their prospects for rebuilding when the rains come.

People listening tonight: if you eat food I would ask you to put your hands up. Maybe you would be out of order if you did that in this chamber, but if you eat food I have got to plead with you and say that you should be engaged in this debate. It is a very serious debate we are looking at. It is a very serious issue with ramifications right across this country.

I come to this debate with a life's experience on the land—bringing up my own family on the land, running my business on the land in a mixed farming enterprise, dealing with droughts and with how you educate your kids, having to send them away to university 700 or 800 kilometres away. And you have to deal with the vagaries not only of the weather but also the international commodity prices. So I come to this debate with a true understanding but also a passion as to how we can help people through this drought and make sure that this nation has food and fibre producers into the future. They are an essential element of any government's responsibility in my view and we must ensure that we have them into the future.

I want to place these figures on the public record. The Reserve Bank tells us that rural debt now exceeds some $64.3 billion. If you put that against gross rural production in Australia, that is something like $46 billion gross value of production, and it is a figure that represents their debt—139 per cent of the gross value of rural production.

Tim McGavin has an MBA, is from the land, is involved in commodities and finance and still holds rural enterprise assets. As he said, with rural debt to gross value of rural production in Australia today running at 130 per cent, that is the sort of number seen in Greece and Spain during the GFC, when they had to address the serious issues they were confronting with their debt to GDP ratio. So Australia's rural debt to GDP ratio is in a similar stratosphere.

James Walker, a fellow Nuffield scholar, is a pastoralist near Longreach whose family's history in the area dates back three generations, to the pioneering families in the area. James Walker held the Drought Finance Future—Industry Renewal Summit a couple of weeks ago, on 21 August, in Longreach. A case study involving a fictitious property called Kidworth was used to represent a troubled pastoral business. The case study was put together by two accounting firms with rural practices, one from Brisbane and one from a rural community. There was also input from the Australian Farm Institute. Although the property was fictitious, it represented a typical property in central western and north-western Queensland. Kidworth's net equity position at the end of 2013 was $1.7 million. But back in 2007, it had $4.3 million. Those are the sorts of losses that people are confronting. That puts landholders in a situation where their debt-to-equity ratio is such that the banks can no longer continue to support them and so may hold them as being at risk or put them on notice. These are very challenging times for people on the land.

The challenge at this summit for the invited guests, including CEOs from as far away as Melbourne and Brisbane, was to come up with a business model that might work for the agricultural and pastoral sector in the future. One of the interesting speakers there was Professor Roger Stone, a climatologist from the University of Southern Queensland. He outlined quite clearly the fact that Australia has the most variable rainfall pattern in the world. He also said that we are confronting a probable El Nino event, though it is not fully developed. His presentation of the climate science suggested that the worst impact would be in central western and north-western Queensland—the very areas that have been impacted by the ban on live cattle exports, which has caused a loss of capital value and an inability to continue regular seasonal production, with many properties having to default on their loan agreements.

This government recognises the situation in many parts of the drought affected areas of Northern Australia. About 75 per cent of the land mass of Queensland is drought declared. I acknowledge that the Minister for Agriculture will very soon be taking the Treasurer out to Western Queensland. He has stated that publicly on the record, and that is a very positive step forward. I thank the Treasurer for agreeing to go with the minister. I think the Treasurer himself has land in North Queensland—probably in a more favourable rainfall area. It is great to see that the Treasurer, despite his busy schedule, is going to take time, at the invitation of the agriculture minister, to go out to Western Queensland. Importantly, the Minister for Agriculture is going to put on a roundtable on 23 September where he is inviting the banks to discuss this very challenging issue—one that we must find solutions to. It is a positive step forward, but it is important that all of the banks that lend in rural Australia be there, because the messages I am getting—and I am sure the minister has been receiving them too—are that, while we are putting financial counsellors in play to assist people with their books and doing financial models to see a way forward when it rains, in some cases banks are prepared to forgive some debt providing they can get accommodation at another bank. In that position, with some debt forgiven, the debt-to-equity ratio looks reasonable, and even some banks are saying, 'That looks okay.' Then they put it to their head office, and they say, 'Because you have had debt written off, or forgiven, we are not prepared to take you on,' notwithstanding that their model would look as though it would be financed in any normal circumstance.

The other thing I am concerned about as we look at when the rains do occur is that the old model that used to occur, which I am sure the member for Grey would understand, is that, when the rains came in the past, the stock and station agent would provide the carry-on finance to provide the money for seed or, in the pastoral areas, provide the money to restock—to buy cows or buy sheep. The pastoralists did not have to worry about it—the finance was there, available. They took a mortgage on the stock and took brokerage fees when the stock were sold. But it is a model of the past; it is no longer there. The stock and station agents of today are not going to do that in the future, and they have not been doing it for some time. What was there in the past will not work into the future.

I remind those who are listening tonight of why this is such an important debate. During the height of the GFC, when Australia had one quarter of negative growth in this country, had we gone into the second quarter of negative growth we would have been in technical recession. The sector that prevented that was the agricultural sector—everything else was in decline, including the mining sector. Why? We had better seasons, we had reasonable prices and the agricultural sector's export performance was increasing. Because of that we prevented Australia from going into a technical recession. So I say to this chamber, and to the people of Australia who are listening: if you eat food, you need to be engaged in this debate. If you do not eat food, I am sure you are not interested. I just say this is a serious debate, and one that I am going to continue. I thank the agriculture minister for what he is doing as we lead into this meeting with the banks, and I am looking forward, if I am invited, to being there to hear their story. (Time expired)